Lexington Ins. Co. v. Rugg & Knopp, Inc.

• Decision Date: 31 March 1998
• Docket Number: No. 96-C-126.,96-C-126.
• Citation: 1 F.Supp.2d 937
• Parties: The LEXINGTON INSURANCE COMPANY, Plaintiff, v. RUGG & KNOPP, INC. and The Salt Lake City Corporation, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

1 F.Supp.2d 937

The LEXINGTON INSURANCE COMPANY, Plaintiff, v. RUGG & KNOPP, INC. and The Salt Lake City Corporation, Defendant.

No. 96-C-126.

United States District Court, E.D. Wisconsin.

March 31, 1998.

David Joslyn, Rivkin, Radler & Kremer, Chicago, IL, for Plaintiff.

Eric Darling, Schmidt, Darling & Erwin, Milwaukee, WI, for Defendant Rugg & Knopp.

Donald P. Schneider, Schellinger & Doyle, S.C., Brookfield, WI, Gary Johnson, Richards, Brandt, Miller & Nelson, Salt Lake City, UT, for Defendant Salt Lake City Corp.

DECISION AND ORDER ADOPTING RECOMMENDATION OF MAGISTRATE JUDGE, DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, ENTERING DECLARATORY JUDGMENT THAT PLAINTIFF MAY NOT DENY COVERAGE ON THE GROUND THAT PLAINTIFF WAS NOT GIVEN TIMELY NOTICE AND DISMISSING PLAINTIFF'S DECLARATORY JUDGMENT ACTION

CLEVERT, District Judge.

A district court must review de novo the recommendations of a magistrate judge to which either party timely objects. 28 U.S.C. § 636(b)(1)(C); United States v. Raddatz, 447 U.S. 667, 673-76, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980). The court may review any other aspect of a recommendation as it sees fit, although it has no obligation to undertake a de novo review absent specific objections. See Thomas v. Arn, 474 U.S. 140, 149, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985) ("Section 636(b)(1)(C) ... does not on its face require any review at all ... of any issue that is not the subject of an objection").

In this case, the court is asked to review a magistrate judge's recommendation on cross motions for summary judgment. Federal Rule of Civil Procedure 56 requires a district court to grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. Pro. 56(c). The party moving for summary judgment bears the initial burden of showing that there are no material facts in dispute and that judgment should be entered in its favor. Hannon v. Turnage, 892 F.2d 653, 656 (7th Cir. 1990), cert. denied, 498 U.S. 821, 111 S.Ct. 69, 112 L.Ed.2d 43 (1990). A defendant moving for summary judgment may discharge this initial burden "by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant satisfies this initial burden, the burden then shifts to the nonmoving party, who must go beyond the pleadings and designate specific facts to support each element of its cause of action, showing that there is a genuine issue for trial. Celotex, 477 U.S. at 322-23; Becker v. Tenenbaum-Hill Associates, Inc., 914 F.2d 107, 110 (7th Cir.1990). Any doubt as to the existence of a genuine issue for trial must be resolved against the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The material facts of this case are not in dispute and the court adopts, by reference, the facts as set forth in the magistrate judge's recommendation. The critical issue is whether Wis. Stats. § § 631.81 and 636.26 apply to claims made policies, like the ones in the instant case. Because there are no disputed facts and the issue of whether the statutes apply is a matter of law for the court, summary judgment is appropriate in this case.

Plaintiff does not object to the magistrate judge's finding that the claims were made within the policy's coverage period. Plaintiff instead argues that the notice-prejudice requirements of the Wisconsin statutes no not apply to claims made policies.

Plaintiff's argument cannot be reconciled with the clear and unambiguous language of the Wisconsin statutes. Section 631.01 states, unequivocally, that Chapters 631 and 632 of the Wisconsin Statutes apply to "all insurance policies ... delivered or issued for delivery in this state" with a few stated exceptions. Any policy that violates a statute or rule is enforceable against the insurer as if it conformed to the statute or rule. Wis. Stat. § 631.15(3m).

Sections 631.81(1) and 632.26, Wis. Stats., govern "Timeliness of Notice" and "Required Provisions." Section 631.81 states: "Provided notice or proof of loss is furnished as soon as reasonably possible and within one year after the time it was required by the policy, failure to furnish such notice or proof within the time required by the policy does not invalidate or reduce a claim unless the insurer is prejudiced thereby and it was reasonably possible to meet the time limit." Section 632.26(2) states that "failure to give notice as required by the policy ... does not bar liability under the policy if the insurer was not prejudiced by the failure, but the risk of nonpersuasion is upon the person claiming there is no prejudice."

By the express language of the statute, the notice requirements are incorporated by law into all insurance contracts. Lopardo v. Fleming Companies, Inc., 97 F.3d 921 (7th Cir.1996) (the Wisconsin notice of claim statute is additional provision of insurance contract that is incorporated into contract of insurance by operation of law). Thus, the cases cited by plaintiff are inapposite, and this court adopts the thorough analysis by the magistrate judge in this regard. By doing business in this state, plaintiff agreed to abide by Wisconsin's statutory scheme and cannot claim ignorance to avoid an undesirable result. Plaintiff has essentially asked this court to carve out an exception for claims made policies when there is no evidence of such exception in the statutes, comments, legislative history, or Wisconsin case law.

Accordingly, the only relevant question is whether the untimely notice prejudiced Lexington. There is a rebuttable presumption of prejudice when the insured fails to give notice of the claim within one year after the time required by the policy, Rentmeester v. Wis. Lawyers Mut. Ins., 164 Wis.2d 1, 8, 473 N.W.2d 160 (Ct.App.1991), but the claim in this case was made to Lexington within seventeen days after the expiration of the policy. Although defendants bear the burden to show no prejudice, Lexington has not argued and cannot show that it suffered prejudice by the delay. The case can therefore be disposed of as a matter of law.

Now, therefore,

IT IS ORDERED that the court adopts the recommendation of the magistrate judge in its entirety.

IT IS FURTHER ORDERED that plaintiff's motion for summary judgment is denied.

IT IS FURTHER ORDERED that defendants' motion for summary judgment is granted.

IT IS FURTHER ORDERED that judgment shall be entered for the defendant declaring that plaintiff Lexington Insurance Co. shall not deny insurance coverage for defendant Salt Lake City Corporation's claims against defendant Rugg & Knopp under insurance policy # 8667036 on the ground that Lexington was not given timely notice of such claims.

IT IS FURTHER ORDERED that Lexington's claim is dismissed with prejudice.

RECOMMENDATION TO DISTRICT JUDGE

GOODSTEIN, United States Magistrate Judge.

On February 2, 1996, the Lexington Insurance Company commenced this action in which it seeks a judgment declaring it is relieved of its duty to defend and indemnify Rugg & Knopp, Incorporated ("R & K") under R & K's insurance policy with Lexington. The Salt Lake City Corporation is also a defendant because the City has an interest in coverage under the insurance policy. R & K disputes Lexington's right to deny coverage and affirmatively counterclaims, seeking a declaratory judgment that the insurance policies cover the claims at issue.

This case was randomly assigned to this court. Jurisdiction is proper based upon diversity and amount in controversy. See 28 U.S.C. § 1332(a)(1). Venue is proper in the Eastern District of Wisconsin. See 28 U.S.C. § 1391(a). Because the parties did not consent to this court's full jurisdiction, the court is limited to issuing a recommendation with respect to Lexington's and R & K's respective motions for summary judgment. See 28 U.S.C. § 636(b)(1)(A).

I. BACKGROUND

Many of the underlying facts are set forth in this court's decision of December 27, 1996, denying the motion of Salt Lake City for a transfer of venue. For purposes of the parties' motions for summary judgment, the following facts are undisputed.

A. The Insurance Policies

In June, 1992, R & K was awarded a contract to design and partially construct a firefighting facility at the Salt Lake City Airport. (Jodi Howick Aff. at ¶ 4). As part of the contract, the City required R & K to acquire "errors and omissions" insurance coverage, the premiums for which were paid by Salt Lake City. (Howick Aff. at ¶ 5).

In April, 1994, Lexington issued a professional liability insurance policy to R & K (hereinafter "Policy 1"), which provided coverage from April 14, 1994, to April 14, 1995. (Complaint at ¶ 9, Ex. A). In February, 1995, R & K applied for a renewal policy (hereinafter "Policy 2"), which was issued for the period April 14, 1995, to April 14, 1996. (Complaint at ¶¶ 10, 11, Ex. B). When R & K applied to renew its policy in February, 1995, it indicated that it was not aware of any circumstances likely to give rise to a claim against R & K. (Lexington Memo., Ex. N). Both Policy 1 and Policy 2 contained the following language with respect to claims made coverage:

The Company [Lexington] will pay on behalf of the Insured [R & K] all sums in excess of the deductible that the Insured shall become legally obligated to pay as damages because of claims first made against the Insured and reported to the Company during the policy period of this policy. This policy applies to actual or alleged negligent acts, errors, or omissions arising out of professional services rendered for others as designated in Item 7 of the...